Criteria or specific requirement: Management is responsible for establishing and maintaining effective internal controls over financial reporting. Effective internal controls are an important component of a system that supports accurate external financial reporting.
Condition and context: During fiscal year 2021, the University did not have in place the processes and controls that would assure the preparation of external year-end financial statements and related note disclosures in accordance with accounting principles generally accepted in the United States of America.
Cause: Such preparation would require the in-house ability to maintain appropriate technical knowledge, including the ability to research current and changing accounting standards as well as unique industry considerations.
Effect: Recognizing the above condition, the University engaged the external independent auditors to assist with the drafting of the 2021 year-end external financial statements. Once drafted, the financial statements were submitted to management for review, revision, and approval. While this practice is common and practical, it is considered a material weakness in internal control over financial reporting since the year-end external financial statement preparation cannot be performed in-house.
Recommendation: We recommend management review, and if practical, enhance the external financial reporting procedures and controls in place to address the preparation and review of external year-end financial statements.
Views of responsible officials and planned corrective actions: Management concurs with the above finding and, accordingly, has engaged the auditors to assist with the preparation of the 2021 year-end external financial statements. Management is currently reviewing the procedures and controls in place to address the preparation and review of external year-end financial statements and will revise and enhance as warranted.
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